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Your Bottom Line

News/Business. Christine Romans. Financial advice. New.

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Washington 7, Us 5, Unitedhealthcare 2, Campbell 2, Warren Buffett 2, U.s. 2, Christine 2, Apple 1, Economy 1, Beautyrest 1, Posturepedic 1, Matt 1, Joneses 1, Psa 1, Unitedhealthcare Insurance Company 1, Cnn 1, Ernst & Young 1, Pimco 1, Gouda Bisque 1, Christine Romans 1,
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  CNN    Your Bottom Line    News/Business. Christine  
   Romans. Financial advice. New.  

    November 17, 2012
    6:30 - 7:00am PST  

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thanks for watching this morning. a special "mart is the new rich" edition of "your bottom line" starts right now. >> thanks, randi. see you at the top of the hour. good morning, everyone. i'm christine romans. your economy is recovering slowly, but the fiscal life is fast approaching. you expect your political leaders to help, not hurt, right? you rehired the guy who lives in this house and he's working to make a deal to avoid the cliff with the guys in this house but when it comes to your family and your house. today smart is the new rich. our new president, same as the old president, the new congress, same dynamic as the old congress, but there's a new optimism in washington about solving our problems. >> we want an agreement. we want an agreement. >> i'm open to compromise. i'm open to new ideas. >> i think it's important for us to come to an agreement with the
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president. >> and that starts with the fiscal cliff. we've sounded the warning. >> job destruction that would happen under the fiscal cliff. >> economic growth is at 2%. this only hurts it. >> on the edge of a fiscal cliff. >> could do some very bad things to the economy. >> but how should you prepare for this scary scenario or for any deals washington makes to avoid it? it's about getting back to basics. taxes, investments, savings, retirement, jobs, the things that made americans secure in the past are no longer guarante guarantees. now a prosperous future depends on knowledge and a solid plan. remember, smart is the new rich. while there's uncertainty in the broader economy, your personal economy can still thrive. washington, wall street, main street, all trying to figure out what the tax bill is going to look like. most republicans in congress have signed this pledge to never ever ever ever raise taxes, even on the very richest of the rich. democrats, including president obama, say raise those taxes on the rich but keep them low for
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everyone else. that's the deadlock, an here's that cliff. if lawmakers don't act the consequences will be felt by just about all of us, taxes for 90% of americans would rise next year. according to the non-partisan tax policy center, your income tax bill would rise $3,500 and if you make 50 grand a year the taxes will raise 2 grand and the infamous 1%, the taxes on them would rise an average of $25,000. that's if we go off the fiscal cliff and the thing we're trying to avoid. say we avoid the fiscal cliff, some americans will pay higher taxes. will crain a cnn contributor, licking his wounds since election day and jean, republicans are now on board by raising revenue by cutting tax breaks, but they are not on board with raising tax rates. >> no, they are not. >> some of them have pledged they will never, ever do that.
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how do we reconcile, that that's the challenge. >> you know, president obama came out this week and said compromise is hard, but we've got to do and do it together. he is still sticking the i want to raise tax rates line, but when i talk to budget experts in washington, they say, well, maybe -- maybe what you do is you reduce tax breaks on the rich at 200,000 or 500,000. >> sounds like a mitt romney plan actually. >> have a bucket of deductions. >> not an up upon lar idea, a smart way to get over political fight over all the tax breaks and maybe the democrats will go for a tax rate hike on people making 500,000 or more, 1 million or more. you know, i don't know how it's going to turn out. i wish, i wish i did. >> i don't think they know. and that's what's so kind of curious about the whole thing because we're so close to having, you know, a new year with a paycheck that's going to -- you know, there are withholding tables and we don't
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know what it be t will be. the ceo of the bond giant pimco wrote an editorial saying president obama will and should insist on increasing taxes on the rich and warren buffett said taxes should be significantly higher on the wealthy, many rich americans like those two guys are paying a lower tax rates, mostly because capital gain taxes are only 15% right now. will both sides seem willing to avoid an economic disaster by extending the bush tax cuts and why do republicans insist so much on protecting the rates on the rich >> regarding the language we use often about this issue. why don't republicans pay their fair share in offends. i hijacked your graphics department to show you why that offends them. the percentage of income tax by those we call the very richest of the rich, the top 1%, those that make over $340,000, they pay 36% of our total federal
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income tax, if we drop that to people who make above $150,000, the top 5%, you can see they pay about 59% of the total federal taxes. >> what level, what income level? >> top 5% which is about 153,000 so when you say pay your fair share. what is fair. that doesn't look very fair to me. that looks disordinantly heavy burden on the rich, fine. the second reason republicans say i'm not excited about raising taxes on anyone, including the rich, the possible detrimental effect. the cbo suggested just that highest portion, those who make over 250,000 could cost 200,000 jobs over the last year. ernst & young said 700,000 jobs over the next ten years. regardless. two years ago president obama felt the same way, christine. in fact, i think we have a clip of this. i also hijacked you on that front where he said this. >> the last thing you want to do is to raise taxes in the middle of a recession because that would just suck up -- take more demand out of the economy and
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put businesses in a further hole. >> he said that two years ago. we are coming out of a recession possibly, a fragile recovery so you ask yourself is raising taxes a good idea now? >> interesting thing happening in washington where people are starting to downplay the fiscal cliff, more like a slope. won't hurt if we go over it and warren buffett among them saying don't worry, it won't be a recession and 535 people won't agree it won't crith u.s. economy. the $7 trillion taken out of the economy over ten years what. would be felt first? >> i think one thing we should go into this with, we may go over the cliff but we won't stay over the cliff. people in washington don't want us over the cliff for a couple of months. >> i think that's risky with the markets. >> that's playing with fire, you know. >> whatever your ideology, whatever you think about taxes and how much revenue we should raise and from whom, we should all agree that everybody should know what the heck it is they have got to pay. >> that's right. >> if i'm going to budget my paycheck, would i like to know what i'm getting in my paycheck.
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>> congress made this to be so horrible that we would never ever do it. congress said like here's a cup of poison. if we don't get a budget deal we'll make us drink the poison. now they are saying that poison won't kill it, but they design it had so we would never be standing here and talking about and it now on the left paul krugman and others are saying go over to the cliff. >> that's right. >> the president gave in twice. how dedicated both sides are to their premise. if we go over the cliff -- >> you don't think it's a slope, it's a cliff. >> i think it's an austerity sloping crisis of some kind. >> i think it's a black diamond slalom course so you're not going down the bunny hill. >> i'll agree is what it does breeds an incredible amount of uncertainty in the markets. if we don't know what tax rates we're paying that has a huge depressing effect on the economy. if we do go over the cliff, all the tax cuts expire. they can come back and say now we want to present tax cuts for
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the middle class and lower income individuals and are republicans going to vote against that? >> there's so much more to be done and said here. i hope we're not here with a special on new year's eve. i hope it's anderson cooper in times square and not us. becoming all too common. wall street tanks after a washington debacle. with the fiscal cliff looming, how can you protect your savings and investments? americans are always ready to work hard for a better future. since ameriprise financial was founded back in 1894, they've been committed to putting clients first. helping generations through tough times. good times. never taking a bailout. there when you need them. helping millions of americans over the centuries. the strength of a global financial leader. the heart of a one-to-one relationship. together for your future. ♪
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or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. see your doctor, and for a 30-day free trial, go to axiron.com. you know, the dow at its worst was down almost 700 points since the election, wow. i mean, pick your reap, but all signals point to the fiscal cliff. sure, there are concerns about europe, sloping growth in china, new tensions in the middle east, all of these things wrapped up together, but what some investors fear the most, rising taxes on their investment. take a look at what's driving that fear. here is what happens to most filers if we go off that dreaded fiscal cliff. capital gains taxes rise from
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15% to 20% and dividends, pay the highest rate and the estate tax rises from 35% to 55%. the non-partisan congressional budget office says going off the cliff will put the u.s. economy right back into a recession and as a matter of fact investors are preparing for a potential drop in stock prices and more volatility. can you avoid any major losses if you get smart about your investments, and now is the time to protect yourself and really understand what you're doing in your portfolio. our guests both say don't panic. matt, a lot of people rely on the dividend yield, that safe dividend yield that they are getting. getting nothing in a binge account, nothing from cds. a lot of older people who have a lot of rich dividend-paying stocks in their portfolio, and they are really worried about what's going to happen here. what's your advice? >> i understand the worry 100%. if the dividend rate goes up you're making less income every month off the dividend-paying stocks. after the election dividend-paying stocks are the safe haven, don't get hit as
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hard when the market comes down. they have gotten just as hard, many even harder so as an investor i would be very concerned as well. a lot of people live off this, too, christine. people are living off every penny they get. if that decreases, that's a big issue. >> talked to a pension plan manager who said there's a lot of demand from safe investors for these kinds of investments, but they are the first kind of thing you'll see going over the fiscal cliff. when you look at different parts of the economy at risk if we go over the fiscal cliff. what does that mean for investors and their portfolios. >> the defense sector could obviously be at risk right now. seen a lot of cuts, $600 billion worth of cuts on the table for defense cuts and a lot of different jobs. health care stocks, a lot of individuals trying to figure out how to play the different health care type investments and quality, but overall we have to understand that just reviewing your asset classes and make sure you have the appropriate mix, making sure that you are minding your volatility, how much risk can you actually take. yes, of course, a whole lot
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safer to be in cash. >> not getting any money on those. >> again, you can sell all your stocks today and go into the safe investment by tomorrow, and that's just not the right thing to do. we have to be a little bit more cautious and make sure we have a qualified rebalanced structure to make sure we have a good rebalancing over the long run. >> here's the next thing. if you get real cautious and jump out with the dow at its worst this week was down almost 700 points from the election. maybe that's pricing the worst case scenario in. who knows. i mean, you could see this as a great buying opportunity, too. >> longer term a great buying opportunity. between now and the end of the year, assuming nothing gets down between now and the end of the year, a lot more volatility. some days rumors will come out a deal is almost done and the markets will rally and the opposite, big down days and if you're a long-term investors, you'll look at stocks, apple is a stock i do own. valuation-wise it's one of the best in the market. it gets cheaper and cheaper. will people stop buying ipods because of the fiscal cliff, i
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don't think so. if you want to buy stocks now, use the selloff to buy in. >> you have to look at the quality of the stocks that are left in this economy. i mean this, economy right now, people have been trimming down their stuff and productivity is up because companies have trimmed down their employment and making sure they are getting more productivity out of the demands they have and making sure the balance sheets and income statements that are left are looking good, compared to four years ago. >> quick, quick response from each of you. you don't think they will put us over the fiscal cliff, they will find some solution. >> i think there will be a solution and once that happens the market does rally and you want to be in the market. >> they will get additional revenues, not a tax rate rise but deductions. >> rebrand it as tax revenue. >> do more revenue. >> do you think we go even for a few days, that would be bad? >> i don't think so. the earlier the better, especially right now with the holiday season coming. >> thanks, guys. that's your portfolio. let's talk jobs. i'll tell you how you can make $70,000 a year with an associate's degree.
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four years. it's a pledge made by mitt romney before the election and matched by president obama's campaign and now it's up to this president to turn president to turn that promise into a reality. here's where we are. you can see that when you add every single month of job lost with every single month with jobs gains since the president took office there are now 194,000 more jobs today than when president obamaook office. but 12.3 million americans remain out of work. it's an employer's market with 3.4 unemployed americans for job opening in the u.s. so to get a job, you've got to be exceptional. our colleagues at cnn money have a gallery featuring how some folks are getting hired. jason russell of atlanta sharpened his entrepreneurial skills after he was laid off from an i.t. job. he co-founded a mobile application company and he credits that with helping him land a new job as a sales engineer. volunteering can also help. greg was looking for a teaching job -- for three years. he says volunteering with local
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high school theatre students helped him build connections in his resume. he just landed a part-time teaching gig. of course, get more education or training. after a divorce, susan of highland park, illinois, went back to school to finish her degree in humanities. she graduated in june. by august, she was work as a bank teller. by the way, if you're thinking of going back to school, consider health care. as our population ages, jobs in this industry are exploding. 296,000 jobs have been created in health care over the past year. one of the few field where is you can make a good salary without a bachelor's degree. dental hygienists can make almost $70,000 a year with just an associated degree. we spent a day with one to get the dirt on cleaning teeth. >> how are you? good to see you. >> nice to see you. thank you. >> reporter: sharmane loves her job. >> this is my passion. this is my career. >> flexibility, high pay and growing demand put dental hygienist at the top of this list. ahead of audiologist,
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occupational therapist, physical therapist, and pop toptometrist. >> we get started and we'll do the exam. >> median income for dental hygienists is about $68,000 a year. hiring is expected to raise 38% by the year 2020. more than three million health care jobs have been added over the last decade. and the industry is projected to grow nearly 30% by 2020. >> the data clearly says that virtually every occupation in health care will see job growth ranging from primary care and general surgery dentistry, even psychologists, but the largest number of new jobs will be mid level jobs. these will be jobs of technicians, of allied health professionals, of home health aides, even health coaches. >> here's the pay for those top jobs in health care. but not all health care jobs are
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created equal. there's huge demand for home health and personal care aides, but they take home about $20,000 a year. good paying jobs take an investment and more school. >> i took the opportunity of doing it in the evenings. it was four days al qae s a wee worked full time. >> so you were working so hard. >> i was working really hard, but it was worth it. >> these are investments you have to make in a career. a decision to not have a job, but to have a career. >> that was my goal. >> she needed an associated degree. the typical program cost $30,000. she made the investment and is collecting the dividends. and we're not just talking about the money. >> when they open that mouth -- >> when they open that mouth, nothing surprises me after 24 years. nothing. >> and it feels good to get that plaque out. >> it does. and that polishing. and walk out with that beautiful smile. knowing that they're going to continue with their home care. >> she's the real deal. another reason she's got a great
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job, teeth cleaning, like most parts of health care, can't be outsourced. now you've got the job. it's time to start thinking about retirement. smart is the new rich quiz. how much money do you need to save to satisfy your basic needs in retirement? is it five times your salary? eight times your salary? 15 times? my rant and the answer when we come back. and over again. ♪ from jammin' jerk chicken, to creamy gouda bisque. see what's new from campbell's. it's amazing what soup can do.
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have you been dreaming about the day you will no longer wake up to this sound? [ buzzer ] that's right, your alarm clock. someday that sound will be for a bridge game or a trip to see the grandkids or tea time, not for the daily grind. many tell us that because of the financial crisis, you can't
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afford to turn off that alarm just yet. and saving for retirement, for most americans, they're consumed with the right now. making the money last as long as the month. at least on that front, though, i'm here to tell you, the crisis is easing. we're doing better on our mortgage payments. late payments fell to a three-year low in the third quarter. there are fewer homeowners who owe more on their house than the house is worth. and americans are cutting back on credit card use. these are all good signs of progress on the monthly budget, which brings me back to the alarm clock. that's to get your attention for the answer to this quiz. the quiz i gave you before the break. fidelity says you need to save eight times your ending salary to meet basic needs in retirement. financial planners tell me it's even more if you make more than $100,000 a year, closer to ten to 12 times your ending salary, and that's not counting how much you'll need for out of expenses.
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look, i don't want to leave you feeling like i'm giving you a lecture here. this is a reminder of the basic rules we set aside after the crisis. first, if you can't afford it, put it down. you're going to be under a lot of pressure to spend, spend, spend over the next few weeks. i can hear the cash registers now. but with every purchase, every time you hear that sound, ask yourself does this get me closer to that magic number of eight times, ten times, 12 times my salary? next, live 15% below your means. you build wealth by spending less money than you earn. it's not about keeping up with the joneses. start saving for college when your kids are young. you tell me i can't afford the necessities now. how am i going to put something away? i'm telling you you can. try this. as soon as your child is out of diapers, take that money, it could be $500 a year, put it into a 529 plan. same thing with any raise you get at work. put it in your 401k or your i.r.a. immediately. start small, build quicso